Analysis: What if Comcast Has Peaked?
Here’s an important question for Philadelphia’s future: Has Comcast peaked? Has its trajectory of ever-more success, ever-bigger profits, and ever-far-reaching power hit a plateau? Has its ability to grow found its limits?
The failure of the Comcast-Time Warner merger doesn’t mean the company is finished and should pack it in, of course. Even without the addition of Time Warner’s subscribers, Comcast is still the largest cable provider in the United States. But the company is facing some headwinds — some that have been apparent for a while, some that revealed themselves during the failed merger process.
Here are three reasons to suspect it’s possible — possible — that Comcast has seen its brightest days, and may be about to go into a bit of decline:
• There’s more competition than ever: When the now-failed merger was announced a year ago, the cable industry was clearly at the beginning of its decline: 2013 saw the first full-year drop in the number of cable customers in the industry’s history, and Comcast has not been immune to the continuing drops since then. The merger, in fact, was supposed to serve as a bit of a bulwark against the downward trend.
It’s not as though people aren’t watching TV, exactly, but they’re not doing it as much on cable anymore: A year ago they were shifting to Netflix and Hulu, and devices like Roku to aggregate and deliver those services. The last few months have seen a proliferation of TV-like services delivered over the Internet — Sling TV, Playstation Vue, and HBO Now have jumped into the fray, and the reports are that Apple will join them soon. The days when Comcast had anything like a monopoly over your viewing choices are clearly, definitively over.
Still, Comcast retains a key to survival: It is still America’s biggest provider of high-speed Internet. Want to keep watching all that Netflix? Comcast will get paid somehow. However:
•There’s more regulation than ever: Everybody knows that the Federal Communications Commission has decided to pursue an official “net neutrality” policy over the objections of Comcast and other Internet providers. No one’s sure what all the consequences will be, but Comcast will be just a little less free to exploit its network for profit going forward.
Ever use UPS? Know how you can pay extra for bigger packages or faster delivery, or just pay a nominal fee to have the package delivered by “standard” service. Before net neutrality, there was the possibility of a future in which Comcast did something similar with Internet data. Really want to download that big movie? Maybe you would’ve paid a little bit more, either to Comcast itself or (more likely) to Netflix and its ilk. The advent of net neutrality makes such possibilities much less likely.
But that’s not the only regulatory development. Remember, earlier this year President Obama backed a proposal that would essentially create a new generation of small-but-potent competitors to Comcast — using federal authority to sweep aside laws in 19 states and allow municipalities to offer their own broadband services like a utility (think how Philadelphia owns the gas company) instead of being forced to pick from major providers like Comcast.
If the FCC adopts that approach, it’ll signal one more problem for the company:
• Comcast’s political power seems less daunting than ever. The proposed merger was always going to generate opposition, because nobody likes to see Goliath bulk up on steroids. But the company’s political might was supposed to carry the day.
Turns out the company had only one of the necessary forms of power: Money. And it spread that money far and wide — to lobbyists, to politicians, to community activist groups, and more. Comcast was thought to be nearly invulnerable on the power front. Yet the government of President Obama — who has attended a few fundraisers in David Cohen’s home — just threw up the roadblocks that halted the merger. What happened?
Well, it turns out Comcast was terrific at generating grassroots power as well — the problem was that that grassroots power was almost entirely opposed to the company. If you ever tried plowing through the thousands of comments the FCC received on the merger, it was clear that almost none of them were Comcast-friendly. Some of it was principled: There were lots of folks worried about the monopoly power of the joint Comcast-Time Warner hybrid. But some of it surely was that Comcast has alienated its customers to a degree that seems almost impossible for such a big, profitable company.
Comcast built its own opposition. That opposition won. That has to hurt.
One other reason to think the company has peaked: It happens. Fifteen years ago, Microsoft was the toast of American capitalism. Now Apple is. And there are signs that Apple itself might be facing a decline of its own. Nobody stays on top forever.
That doesn’t mean the company will roll over and die. Microsoft is thought to be on the down side these days, but it still generated $86 billion in revenue last year. It’s not the worst thing to be an also-ran in the tech industry.
And there are other trends that could propel the company to unexpected new heights. The company has diversified its offerings — always a good hedge against slumps — into areas like home security and more. Plus, the new Comcast tower being built in Center City Philadelphia is supposedly devoted to the cause of innovation: Perhaps it will generate new strategies and new products to keep the company on top a while longer.
But the signs of possible decline are unmistakable. It would be a shame if Comcast’s twin towers turned out to be white elephants, akin to the Detroit GM tower that highlights that city’s skyline with ghosts of a better past. For the first time in a long time, Comcast’s upward trajectory has been interrupted. We’re about to find out if that’s a blip, or if the company is on a new path.
Follow @JoelMMathis on Twitter.